The Royal Commission into Misconduct in Banking, Superannuation and Financial Services is likely to give rise to an upsurge in complaints to the Australian Financial Complaints Authority, but no funding provision appears to have been made, according to the Association of Financial Advisers (AFA).
In a submission filed with AFCA around funding of the new complaints-handling body, the AFA has warned of a blowout in costs, particularly around superannuation, which may end up having to be carried by the financial planning community.
“… we would presume that complaint volumes have increased over the course of 2018, since the commencement of hearings at the Royal Commission,” the AFA said. “With the upcoming round on superannuation, we recognise the risk that this could trigger a material increase in complaints, yet the funding model for superannuation complaints does not have provision for a user pays element.”
The AFA said that it appeared unclear how a blowout in costs on superannuation complaint activity would be covered.
“We note that the impact of the Royal Commission will be at two levels. Firstly, in prompting clients and members of superannuation funds to complain, but also in terms of encouraging certain legal firms to be more active in advertising and promoting legal activity,” the AFA submission said.
“We do not oppose lawyers being involved in complaint matters where that is absolutely necessary, however in most cases complaints to AFCA should not require a lawyer and the impact will be that the lawyer takes a significant share of any compensation award,” it said.
“We also appreciate that the increase in the monetary limits and compensation caps will most likely impact upon complaint volumes and the level of activity. Given the expectation of more higher value complaints, it would be expected that these will be complex complaints that are resource-intensive.”
The submission said the AFA supported the principles of the AFCA funding model but added “we note the risk of the fixed levy approach to superannuation potentially impacting upon the principle of minimising sectorial cross subsidisation should superannuation complaint volumes exceed the expectation”.